20111210
Reuters
(Reuters) - Egypt's army said it has not accepted a $3.2 billion financing facility from the International Monetary Fund because it did not want to build up debts while it was in power for a transitional period.

But General Mokhtar al-Mullah, a member of the ruling military council, said the prime minister or finance minister would have the authority to agree to such a facility from outside in the case of "extreme need."

Egypt negotiated a $3.2 billion facility with the IMF earlier this year, only to turn it down in the summer. Since then it has sent conflicting messages about whether Egypt still wants the funds, even as the economy has hit the buffers.

The finance minister at the time had said the army was wary of building up debt and said Egypt would rely on domestic sources of funding.

"The easiest thing would have been for the military council to accept the loans from abroad, give it to Egyptians to live a better life and then hand over power and the Egyptian people would have been responsible to repay these debts," Mullah said, when asked about the IMF facility.

"So we have said that these loans are only for extreme need," he told a group of reporters.

Details of the briefing, which was held on Wednesday, and a full recording of it were provided to Reuters.

Mullah added that "if the finance minister or prime minister see that there is an extreme need to take the loans from any source" they would have the authority to take them.

Foreign reserves have plunged from $36 billion at the end of 2010 to about $20 billion at the end of November in the wake of the uprising that unseated Hosni Mubarak and the subsequent political turmoil that sent investors and tourists packing.

Economists say the economy could be headed for a currency crisis. They say funds from the IMF could help stabilize the nation's finances and might provide assurances to other investors or lenders.